Commentary on Political Economy

Sunday, 16 August 2020



Trump signals he has more Chinese companies in his sights

Donald Trump has given ByteDance 90 days to divest TikTok’s US operations © AP

Donald Trump has signalled that he is considering taking action against more Chinese companies, including Alibaba, one day after he ordered ByteDance to divest TikTok’s operations in the US within 90 days.

Asked whether he was contemplating punitive action against more Chinese companies, such as the ecommerce giant Alibaba, Mr Trump replied: “We’re looking at other things, yes we are.”

The White House did not provide any explanation about the comment. But it comes as Mr Trump increasingly takes aim at China, which he blames for the spread of coronavirus, ahead of the US presidential election.

As well as the ByteDance order, the US president on Friday ended a waiver that had allowed some US companies to continue selling goods to Huawei, the Chinese telecoms equipment firm that the US believes spies for Beijing.

Mr Trump has made a series of assertive moves against China in recent months to address what his officials say are economic and national security threats from the Chinese Communist party.

Most China experts in the US believe that he will increase pressure on Beijing ahead of the US election.

In his TikTok order, Mr Trump said there was “credible evidence” that ByteDance might take action to hurt US security.

His order for ByteDance to divest TikTok within 90 days followed a recommendation from the Committee on Foreign Investment in the US (Cfius), a government panel that vets foreign acquisitions of US companies.

The order came one week after he issued a directive banning US companies from dealing with TikTok unless ByteDance sold the app to an American group within 45 days. The latest move goes further by providing a deadline for ByteDance to sell its TikTok operations in the US.

Microsoft has been in talks to buy the app.

A senior US official said the new order would add to the pressure on ByteDance to sell TikTok because the value of the asset would fall as the 90-day deadline approached.

“If no deal [with Microsoft] is reached, this could shut TikTok down in the US in 90 days,” said Kevin Wolf, a partner at Akin Gump who oversaw the commerce department’s sanctions list until 2017.

Separately, the commerce department took aim at Huawei by ending a waiver that had given a temporary reprieve to US companies by allowing them to continue servicing contracts with Huawei without a licence.

Huawei denies the US claim that it helps China conduct cyber espionage.

The most high-profile beneficiary of the temporary waivers has been Google, which has continued updating its Android operating system on old Huawei phones.

The US official said the White House was sending a signal to companies that they needed to decrease their business with Huawei and also that there would be an increasingly high hurdle to issuing any licenses.

Mr Trump had taken a slower approach on Huawei than some hawks had hoped, as he tried to avoid derailing trade talks with Beijing. But he has recently shifted tack on China ahead of the US presidential election, as he blames the Chinese government for the global spread of Covid-19.

His tougher line on China has also given hawks in his administration a window to push him to take other actions against Beijing.

The White House last week took aim at Tencent, a high-profile Chinese technology company, by giving US companies 45 days to stop dealing with WeChat, the ubiquitous messaging app owned by Tencent. That move spurred speculation that he was willing to take action against big Chinese companies that produce popular goods and services in their home market

Mr Trump has recently imposed sanctions on Chinese and Hong Kong officials after Beijing imposed a draconian security law on the former British colony to crack down on pro-democracy, anti-Beijing protests.

Steven Mnuchin, the Treasury secretary who chairs the Cfius process, said Mr Trump on Friday evening “issued an order prohibiting the transaction that resulted in the acquisition of, now known as TikTok”.

He added that ByteDance would have to divest any assets that were used to “enable or support the operation of TikTok” in the US and also any data that it had obtained or derived from TikTok or users in the US.

ByteDance bought in 2017 and merged it with its existing TikTok app, fuelling growth of the video platform. Last year, Cfius opened an investigation into the acquisition. Though was a Chinese company, Cfius had jurisdiction because it had a large US presence. 

Earlier this week, John Demers, the top US justice department national security official, said Washington was increasingly vigilant about the ability of the Chinese government to glean the personal data of American citizens via apps such as TikTok. Mr Demers said Cfius was widening its approach as the threat to data grew with the pervasive use of smart technologies.

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